BlueSmirf - strange behavior?

Hey guys, I’m using a BlueSmirf gold as a serial cable replacement for a couple of weeks now and it has been working just fine. Yesterday, while trying to connect it to a GPS receiver, I noticed there was no data coming through on Teraterm. Note that I was still able to pair with the device and always got the solid green LED after opening the virtual COM port on my PC. I checked the physical connections and made sure the grounds of the two devices were tied. The baud rate of the BlueSmirf matches the receiver so that shouldn’t be a problem. When I ran a basic loopback test on the module by shorting the TX and RX pins, I didn’t see my typed characters being echoed on the terminal. The strange thing is, when I connect the BlueSmirf to the UART on my Arduino Mega board and implement a loopback in software, I actually see the characters being sent back to my terminal. I’m really puzzled as to why this would work and shorting the pins wouldn’t. Is it possible that I fried only the UART on the BlueSmirf somehow? But that wouldn’t make sense since my Arduino is able to send and receive data from it. I’m just worried since the loopback test with shorted TX and RX pins always worked with this module and it doesn’t anymore. Does anyone have ideas what might be wrong?